Here’s what President Obama said yesterday in his press conference:
Now, the loan guarantee program is designed to meet a particular need in the marketplace, which is — a lot of these small startups, they can get angel investors, they can get several million dollars to get a company going, but it’s very hard for them to then scale up, particularly if these are new cutting-edge technologies. It’s hard for them to find private investors. And part of what’s happening is China and Europe, other countries, are putting enormous subsidies into these companies and giving them incentives to move offshore. Even if the technology was developed in the United States, they end up going to China because the Chinese government will say, we’re going to help you get started. We’ll help you scale up. We’ll give you low-interest loans or no-interest loans. We will give siting. We will do whatever it takes for you to get started here.
Solyndra, the poster child of the program was far from a startup company. The company had roughly $600 million invested at the time of the DOE’s $535 million dollar loan.
So, who is really benefiting from the DOE loans? Huge companies that really don’t need taxpayer help. For example, the latest “startup” to receive assistance is the Desert Sunlight Project, owned by GE Energy Financial Services and Next Era Energy ($22 billion market cap). Here’s a write-up of the transaction, the taxpayer loan information is at the end:
First Solar sells 550MW Desert Sunlight Solar Farm
First Solar Inc of Tempe, AZ, USA, which makes thin-film photovoltaic (PV) modules based on cadmium telluride (CdTe) as well as providing engineering, procurement & construction (EPC) services, has completed the sale of one of the world’s largest photovoltaic (PV) solar power projects — the 550MW (AC) Desert Sunlight Solar Farm near Desert Center, CA — to affiliates of NextEra Energy Resources LLC (a subsidiary of NextEra Energy Inc of Juno Beach, FL, USA, and the largest generator in North America of renewable energy from the wind and sun) and GE Energy Financial Services, which have each acquired 50% of the project.
First Solar will continue to build and subsequently operate and maintain the project under separate agreements. A NextEra Energy Resources affiliate will manage it. “Acquiring a 50% interest in the Desert Sunlight project is consistent with our strategy to add fully contracted clean energy to our portfolio,” says NextEra Energy Resources’ president & CEO Mitch Davidson.
The project is located 35 miles west of Blythe and six miles north of Desert Center in the Chuckwalla Valley on about 3800 acres (with 200 more acres for related infrastructure) of largely vacant land managed by the Bureau of Land Management. First Solar will supply some modules from a new $300m factory it is building in Mesa, AZ, that will employ 600 people to support Desert Sunlight and other US PV projects. Full commercial operation is expected by first-quarter 2015.
First Solar estimates that Desert Sunlight will employ up to 630 people for construction, which began in September. The project will provide enough energy to power about 160,000 California homes and displace 300,000 metric tons of greenhouse-gas emissions per year (equivalent to taking 60,000 cars off the road). Total indirect local economic benefits to Riverside County, where the project is located, are estimated at $336m, generated mostly during construction, with the remainder over the minimum 25-year operating period (according to an economic benefits study by Coachella Valley Economic Partnership and The Brattle Group), including nearly $200m in wages. Indirect benefits result from local business-to-business transactions (e.g. local purchase of building materials). The project is expected to contribute $27m in sales and property tax revenue to the county. Desert Sunlight should also help California to meet its target of generating 33% of its power from renewable sources by 2020. The project’s power will be sold under two long-term power purchase agreements: a 250MW agreement with Southern California Edison and a 300MW agreement with Pacific Gas and Electric Company.
To expand the pool of potential lenders to the project (with the aim of encouraging the development and deployment of clean energy, jobs and reduction of the USA’s reliance on fossil fuels), the US Department of Energy Loan Program Office is partially guaranteeing $1.46bn in loans for the project, provided by a syndicate of private institutional investors and commercial banks headed by lead lenders Goldman Sachs Lending Partners LLC and Citigroup.
“We look forward to working closely with the new owners as we build and operate the facility, bringing jobs, renewable power and energy security to California and the USA,” says Frank De Rosa, First Solar’s senior VP of Business Development — Americas.
So, why are taxpayers on the hook when the owners of this venture have more than adequate access to the capital markets for the loan themselves?